4/1/2009 5:00:00 PM
Operators’ smaller ranges
Operators and manufacturers are colliding on a number of fronts, including margins, services on phones and product range sizes opening up. Skype on handsets is the latest and most extreme example of manufacturers wanting more services, more expensive phones and slowly encroaching onto operators’ turf. At the same time, Vodafone is targeting own-brand handsets, using low-cost Chinese manufacturers. Nokia bought a payments company this week for $70m, ostensibly for the American market, but it has the whiff of setting up a billing relationship with the consumer.
Meanwhile, operators are determined to cut their product ranges and stock sizes, and are becoming more ruthless about not taking a handset if there are any doubts on reliability. One manufacturer source confirmed this trend, and said: ‘The old argument that you have to take [a handset] because it is flagship no longer applies. Operators are being very hard nosed.’
The power swing towards operators is driven by the increasing importance of cash (operators have it), and the fact that there is no-one breaking rank. All the operators, and even Carphone Warehouse and Phones 4u, are in the same cost-cutting boat. Operators are starting to view bulging product ranges of high-end smartphones, many of which will remain unsold, as a luxury. Inventory control, cashflow and efficiency are the watchwords.
It has upped the ante on both sides to make the right calls. There is considerably less margin for error. Manufacturers can’t rest on a saturated, hit and miss product range and there is greater punishment for an unreliable handset (just ask Sony Ericsson). Operators, similarly, are more exposed to a slump if their ranges are smaller. The interesting aspect of all this is that operators’ product offerings will look very different this year, with exclusives and smaller ranges.